Science Fiction Author, Freelance Writer and Researcher

The Asian and Western Paths of Development

Kaoru Sugihara (2013) argues that industrialisation can be viewed as two distinctive paths – the Western Path and the Asian Path. The Western Path is that seen in European industrialisation, while the Asian Path is that identified for East Asian industrialisers (specifically Japan). This essay will be contrasting the paths in terms of the historical factor endowments that caused them and then comparing them in practice. The essay will be concluding by discussing the significance of the two paths in our understanding of industrial diffusion.

This essay will ultimately find that the paths diverged due to different historical factors, which led to a necessity for different industrial practices and strategy.

The Western and Asian paths developed as a result of a difference in land availability, access to labour and access to capital.

Land was scarce in Japan, relative to Europe where much of it was available.[1] Because of this, Japanese agriculture focused on maximising output per unit of land.[2] As a result of focus on production rather than capital accumulation in the form of fixed assets (such as cattle and fences), Japanese workers and government did not achieve the same level of capital as in Europe. Instead, Japanese peasants during Proto-Industrialisation became heavily involved in additional work to make extra income.[3] Income was used fundamentally to uplift the family, creating a sense of collective responsibility.[4] As industry was focused on the home, families determined division of labour.[5] This is in contrast to Europe, which focused on individual success and dividing labour through the market.[6] Europe was able to accumulate a high amount of capital through access to banking facilities and, as Sugihara argues, trading over the Atlantic.[7]

Japan’s industrialisation had to rely on skilled and cheap labour because of a lack of capital and land. The Meiji government recognised this need and formulated strategies that allowed the Japanese to achieve their comparative advantage through the use of skilled, cheap labour.[8] As a consequence of the historical need to maximise output, Japanese workers had become exemplary workers, willing to work well for little pay.

As a result of the differing historical factors, Japan opted for a labour-intensive, light industry while Europe focused on capital-intensive, heavy industry. Sugihara argues that the defining trait of the diffusion of industrialisation in Asia was labour-intensive industries.[9] While continental Europe industrialised through the import of capital and technology, developing capital and resource intensive industries, Asia did not have that sort of privilege.[10] In order to compete with the early industrialisers, Asian nations would have to focus on their comparative advantage – a large, skilled, labour force.[11] While urbanisation became a hallmark of Europe’s industrialisation, Japanese rural industry flourished under the Asian path.[12] This was primarily due to the scarcity and expense of land. As such, instead of developing heavy industries, the Asian path saw the growth of light-export focused production, such as textiles. Sugihara contends that the best way to identify the path of a country is to study their exports.[13] Japan focused on light-goods, as it recognised its advantage in producing them. The Japanese strategy saw a combination of the use of labour-intensive industry, modernisation of rural, traditional industry and an adaptation of Western technology to suit their own needs.[14]

In order to support their diverging needs, the West required institutions to provide capital (banks, stock exchanges, trading companies) and the East required a good amount of human capital, which they possessed in their historically skilled and cheap labour force.[15]

The fundamental significance of the two paths theory is that it shows how different conditions result in different strategies to adapt to said conditions. The diverging strategies help us understand that there is no singularly correct strategy to industrialise. Countries are different, with vastly differing factor endowments. These factor endowments have a profound and domineering effect on the methods which a society will use to industrialise. The theory helps us understand why certain civilisations developed differently and, perhaps, suggests how developing countries should attempt industrialisation – through an analysis of their own conditions.

Sugihara’s two paths theory identifies the diverging natures of Asian and Western industrialisation. It recognises that different factor endowments and historical conditions lead to a need for different forms of industrialisation. Europe developed capital-intensive, heavy industries as a result of a lack of skilled labour and an abundance of resources and capital. Conversely, the Japanese focused on labour-intensive industry which developed their already existing traditional industries, adapting technology when needed for their context. The significance of the theory is simply a recognition that differing conditions will result in a need for differing strategies.

Due to this observation, there are almost certainly more than two paths. Every country has different conditions and, thus, will need different strategies to achieve industrialisation.